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Wednesday, July 04, 2007

France, unemployment, discrimination and the future.

What is going on regarding employment in France as opposed to the United States. I decided to check the Human Development Indexpublished by the United Nations. This is the last index, for 2006, and you can find all the numbers in Table 20 if you wish to do so.

Now these numbers are slightly out of date as any statistic is. But they cover the same period of time and both the US and France saw some improvements since then. But the ratios between the two countries remained pretty much the same.

The United States in 2005 (the 2006 report, the last printed, is for the previous year since you can’t gather statistics in advance unless you live in Cuba) had an unemployment rate of 5.1%. In addition the average unemployment rate for the previous decade (1995 to 2005) was also 5.1%. The socialist worker’s utopia of France had slightly different numbers. Their unemployment rate was almost double that of the US at 10%. And the unemployment rate for the previous decade was just over double that of the US: 10.4%.

The UN report also looks at the differences in unemployment rates between men and women. For instance in Sweden the unemployment rate for women, when compared to men, is 100%. That means women looking for jobs aren’t any more likely to be unemployed than men doing so. In other words Sweden is pretty egalitarian when it comes to how women are employed there. So what about sexist America? They tied with Sweden at 100%. No discrimination against women when it came to finding jobs.

And what about the much praised French? Apparently they don’t take gender equality quite as seriously. For every 100 men who couldn’t find work there were 127 women who were left unemployed. Of course I’m sure they have all sorts of laws mandating equality. But then the Soviet constitution guaranteed human rights. Paper is cheap. When the rubber hits the road French women are in worse shape than American women when it comes to being offered employment.

What about the youth unemployment rate? Now everywhere the youth unemployment rate is slightly higher than the normal rate. This is because young people have less experience and less skills by definition. They are, after all, just learning.

Economic theory tells you that if the labor market is tightly regulated, driving up the cost of labor, that the least valuable worker will have the hardest time finding employment. That’s pretty basic stuff except for socialists who don’t believe in economics that contradicts their ideology. But if the theory is correct then the tighter the labor regulations the higher the unemployment rate for the young. Keep in mind that some disparity is natural due to the lack of skills.

The youth unemployment rate, for those between 15 and 24 years of age, in the United States is 11.3%. This is an area where France has big problems (as we shall see shortly). In France the youth unemployment rate, according to the UN index, is 22.8%. Again it is more than double that of the US.

And what about gender disparity there? Here US employers do seem to have a bias — against young males. For every 100 young American males who can’t find employment only 82 young American females are in the same boat. French employers too have a gender bias — against young females. For every 100 males who can’t find work there are 115 females who can’t.

What about long-term unemployment. It is one thing for someone to lose a job and find they can replace it within a few weeks or a few months. It is quite another that when a job is lost it remains lost for significant periods of time.

The UN looked at that as well and they broke it down according to gender. Now the number they come up with is a percentage of the unemployed, not a percentage of the population. If you have 100 unemployed they are looking at what percentage of those people have been unemployed long term.

For unemployed American women 10.8% have been in that state long term. So that is 10.5% of the 5.1% who are unemployed. That is about one half of one percent of the female population in the United States. The long term unemployment for men is slightly higher at 12.6%. So that is 12.6% of 5.1% for a total of just over half of one percent of the male population. Long term unemployment is not a significant problem in the United States unless the UN is just lying and is run by Right-wing, pro-American fanatics. (I don’t think we need worry about that.)

So how does the worker’s republic of France compare? Of French unemployed women 43.2% are classified as long term unemployed. They are significantly more likely to be overlooked for a job in the first place and make up a disproportionate number of unemployed. I think you will find the male unemployment rate in France was about 8% while the female rate was about 12% during this period. Approximately 5% of French women have been unemployed long term. That is 10 times higher than their American counterparts. Vive la France, ladies.

The percentage of male workers in France who have been unemployed long term is also staggeringly high at 41.8%. That would be just short of three and a half percent of all French men. That would mean that a French male is about five to six more likely than his American counterpart to be unemployed. Not good but then they have a better chance than the women who seem to get shafted first by the high employment of a tightly regulated labor market and then by a certain amount of gender discrimination in the French workplace.

Now if you don’t like the statistics write the UN. I didn’t make them up. They are public record.

Prof. Paul Romer, considered a candidate for the Nobel prize in economic sciences, has looked at French unemployment in comparison to Canadian unemployment and the picture is pretty much the same. French workers are having a hard time finding work especially the young. And he puts to rest the claim this is because French youth are all off at university living off the taxpayers. Romer writes:

So the two major differences between France and Canada are (1) France has a lower labor force participation rate, and (2) long-term unemployment is much more prevalent in France. There are several explanations for these differences. A recent article in the Financial Times suggested that the main reason for the lower labor force participation rate may be that more twenty-somethings in France attend university. In fact, this can account for only a small part of the difference. The fraction of 20- to- 24-year-olds in education is only five percentage points higher in France--44% compared with 39% in Canada. Most of the 25 percentage point difference in labor force participation rates must therefore arise for some other reason.

A more troubling explanation for both differences is that many young people in France stay out of the labor force because they are discouraged--that is, they have been unemployed for so long that they do not feel that they can find a job, so they stop looking. Or they never bother to look. How many students would try to find a summer job knowing that it could take more than a summer’s worth of searching to find one? If many of the people who are out of the labor force would actually like to work but are so discouraged that they don’t even try, the human cost of France’s labor market rigidities may be even higher than its unemployment rate suggests.

Romer is not alone. French economist Anthony de Jasay, author of Justice and It’s Surroundings,says that the actual unemployment figures of France are worse than the state admits: “To this somewhat doctored figure should be added another 1-1.5 per cent in make-believe employment funded with public subventions, and 1.2 million of mostly young people not eligible for unemployment who receive a minimum income of about $400 a month.”

Mr. de Jasay argues that this rampant idleness is a root cause of the unrest that periodically surfaces in France. He wrote:

With the model at cruising speed, an average of a mere 80 parked vehicles a night are burnt by small street gangs in search of a kick. At 30,000 vehicles per annum, the loss is hardly remarked. When last November the nightly burnings hit a peak of 1,400 vehicles, not to speak of the (partial) burning of 255 schools and kindergartens, 233 town halls and other public buildings and even a church as the gangs competed with each other for reputation and television coverage, stoning firemen and battling the police, the "social model" was manifestly running in top gear.

De Jasay says: “the obvious reason for the flare-up is that a mass of closely packed young males living in almost total idleness, with their most likely prospect being continued idleness as far in the future as they can look.” And he notes that in the areas where the riots took place the youth unemployment is about twice the average for France in general. So while unemployment is high for everyone it is higher for women than for men, for the young more than the old, for young women more than young men and for racial minorities the highest of all. So much for the vaunted egalitarianism you hear about. De Jasay notes that this is what one expects in such distorted labor markets:

When unemployment is as high as the "social model" makes it, thanks to its top—heavy social insurance premiums which raise wage costs to the employer way above the take-home pay employees must get, many things start going awry in a society. One of them is discrimination: employers will recruit, if they recruit at all, among candidates about whom they know the most, who have credible sponsors and are within easy reach. Discrimination against Arabs and blacks will stop when unemployment decreases and the labour market reaches equilibrium—an outcome blocked by the elaborate barrier of the much-touted "French model".

One year ago the International Herald Tribune explored an anomaly in the French labor market. Official statistics were showing a decline in unemployment but new jobs were not being created. They noted that the number of jobs were increasing by a dismal 300 new positions per month but the number of registered job seekers had declined by 24,800 per month.

That suggests that the decline in the jobless rate is the result of a growing number of people coming off unemployment benefits as the government tightens access and, maybe more significantly, of a decline in the working-age population as baby boomers begin to retire, economists said.

Unemployment and job creation used to be two sides of the same coin, said Philippe Waechter, an economist at Natexis Asset Management in Paris. But now, "the link between the two is in the process of weakening, and that means unemployment statistics are less meaningful," Waechter said. It is more relevant to look at job creation figures and participation rates, he said.

But is the job creation figures that were dismal in France. Apparently the modest declines in French unemployment are not exactly telling the full story and conditions are worse than they appear. People are leaving the unemployment lines but not because they found jobs. And with quarter to quarter economic growth rates of about half a percent something has to be done.

French President Nicolas Sarkozy has said he will change things. He is proposing tax relief and said he will cut the payroll surcharge on extra work hours to encourage people to work more. Prime Minister François Fillon says France “must rewrite our political, social and cultural contract” and that “There is a cancer at the heart of the national crisis: mass unemployment.”

One wishes them luck. The difficulty will be that the mentality of the welfare state is deeply ingrained in the culture and people refuse to see the links between the problems they face and the system that causes them. There are none so blind as those who refuse to see.